It’s been a year since Citron explored the corporate actions of Nu Skin (NYSE:NUS), the Utah-based MLM Company most dependent on revenues and growth from Mainland China, while operating an illegal pyramid scheme.

In the intervening year, Bill Ackman focused attention on the legal jeopardies of the MLM model with regard to FTC regulation within the United States with his critique on Herbalife and introduced a debate on the legality of MLM. THIS REPORT DOES NOT CARE. As tweeted in the past, Citron was long HLF and most importantly readers must understand that not all MLM are created equal – Ackman just bet on the wrong horse.

In particular, we note gross misuse of statistical data, flagrantly disregarding of the FDA’s own guidance with regard to the use of the MAUDE dataset.

A couple of points in particular stand out:

· Your computation and graphing comparison of MAUDE adverse event rates is misleading. As you well know, it is extremely unlikely that FDA Adverse Event Reports on surgeries performed outside the United States will ever be filed. Nevertheless, you choose as a denominator “completed worldwide surgical procedures”.

· Further, the FDA site itself warns specifically “the incidence orprevalence of an event cannot be determined from this reporting system alone due to potential under-reporting of events and lack of information about frequency of device use.”

The only point confirmed by the graph published at the link above is the still unanswered question regarding the massive increase in backdated adverse events reports in August. Since the over 97% of AE reports filed this year in MAUDE are filed by the company, clearly only the company is capable of answering this question.

As the FDA site itself states:

Although MDRs are a valuable source of information, this passive surveillance system has limitations, including the potential submission of incomplete, inaccurate, untimely, unverified, or biased data. In addition, the incidence or prevalence of an event cannot be determined from this reporting system alone due to potential under-reporting of events and lack of information about frequency of device use. Because of this, MDRs comprise only one of the FDA's several important postmarket surveillance data sources. As stated clearly by the FDA

· MDR data alone cannot be used to establish rates of events, evaluate a change in event rates over time or compare event rates between devices. The number of reports cannot be interpreted or used in isolation to reach conclusions about the existence, severity, or frequency of problems associated with devices.

The public deserves a higher degree of accountability from a company whose products are of such widespread impacts with regard to health outcomes. Is this an example of bad science or investor relations out of control? It is about time your company understands that propaganda and share buybacks do not mitigate the usage of your machine by untrained surgeons. You have a problem on your hands – and this is only making it worse.

Very Truly Yours,

Andrew Left

Editor, Citron Research

P. S. September MAUDE reports have just been posted. Another 102 injury-type reports and another 4 death-type reports. This exceeds August's record high, which was itself four times any previous reporting period in the company's history.

“You can’t solve a problem with the same mind that created it.”

— Albert Einstein

A woman on vacation takes a walk on the beach, recovering from a recent hysterectomy. All of a sudden, her colon falls out of her vagina down to her knees – but think on the bright side, the procedure helped meet the Clinical Sales Rep’s quarterly quota!

In over 12 years of publishing probative stock research, Citron is most proud of the work we published on Intuitive Surgical (NASDAQ:ISRG) starting last December. Not because the stock suffered a decline of over 30% amidst a record-setting bull market, but rather because we helped raise to the forefront of public awareness the undisclosed dangers of robotic surgery and the subsequent dilemma: what happens when medical best practices collide with unbridled thirst for profits.

The FDA's MAUDE database of adverse events affords the market a glimpse of the consequences, so Citron updates its ground-breaking coverage, again publishing the whole thing in an easy-to-study format.